- On 19 June 2023, the EC proposed new rules for a common EU-wide system for WHT on cross-border dividends or interest payments: Faster and Safer Tax Excess Refund (FASTER). The aim is to foster cross-border investment, tackle tax fraud and simplify taxation. It would also establish a way for tax authorities to share information and cooperate. This proposal may be relevant for UK investors receiving EU-source passive income.
- Under the proposal, member states will be able to choose between one of the two fast-track procedures complementing the existing standard refund procedure:
- a fully-fledged common EU relief at source system (with the WHT treaty rate applied at the time of the dividend/interest payment, avoiding double taxation), or
- full payment of WHT at source but with a faster WHT refund process (limited to 50 days).
- A proposed common EU digital tax residence certificate is intended to make WHT relief faster and more efficient. For example, investors with a diversified portfolio in the EU will need only one digital tax residence certificate to reclaim several refunds during the same calendar year. The digital tax residence certificate should be issued within one working day after the submission of a request.
- Large EU financial intermediaries will be required to join a national register of certified financial intermediaries and report the payment of dividends or interest to the relevant tax authority, to allow the latter to check eligibility for the reduced rate and detect abuse. The register will also be open to non-EU and smaller EU financial intermediaries on a voluntary basis. Taxpayers investing in the EU through certified financial intermediaries will benefit from fast-track WHT procedures and avoid double taxation on dividend payments.
- Timing: the EC ran a public consultation on the proposal until 18 September 2023. Once adopted by member states, the proposal should come into force on 1 January 2027.
Resources (click to open)
- EU Commission proposes new FASTER directive to simplify WHT procedures (Deloitte tax@hand, June 2023)
- New rules on withholding tax procedures in the EU (EC press release, June 2023)
- Withholding taxes – new EU system to avoid double taxation (EU consultation, April 2022 until 24 June 2022 and consultation outcome)
